Willamette Week: 9 Things The Rich Don't Want You To Know About Taxes

[Larry]

Link.

Really long article. And I certainly assume that it was written with a deliberate agenda. It shows a lot of information, showing what some people will no doubt claim is one side of a political debate.

OTOH, I also assume that, while the author probably chose to only report those facts that promoted his agenda, I don't see anything in there that I don't think is a fact.

I don't really think that the headline fits the article.

For three decades we have conducted a massive economic experiment, testing a theory known as supply-side economics. The theory goes like this: Lower tax rates will encourage more investment, which in turn will mean more jobs and greater prosperity—so much so that tax revenues will go up, despite lower rates. The late Milton Friedman, the libertarian economist who wanted to shut down public parks because he considered them socialism, promoted this strategy. Ronald Reagan embraced Friedman’s ideas and made them into policy when he was elected president in 1980.

For the past decade, we have doubled down on this theory of supply-side economics with the tax cuts sponsored by President George W. Bush in 2001 and 2003, which President Obama has agreed to continue for two years.

You would think that whether this grand experiment worked would be settled after three decades. You would think the practitioners of the dismal science of economics would look at their demand curves and the data on incomes and taxes and pronounce a verdict, the way Galileo and Copernicus did when they showed that geocentrism was a fantasy because Earth revolves around the sun (known as heliocentrism). But economics is not like that. It is not like physics with its laws and arithmetic with its absolute values.

One chart from the article:

[DRSmith]

People never seem to realize an economy needs money to flow and it goes top to bottom not down, there was a reason why Jews under the law code had a reset button every 7 years

[HoustonSkin]

Nothing all that revealing in that article. Different types of income are taxed differently. I think that the tax code needs to be simplified, and eliminating the various classifications of income would be a big part of that.

The things the rich are "getting away with" are basically the same things middle class people are getting away with. If I invest in something and leave it in an account and don't actually access the cash to spend it, is it income? This is what a Roth IRA is. I put money in a Roth IRA, the gains are not taxed until I take them out. If a hedge fund manager can borrow money at a low rate from someone without paying "income tax" on it, because his investment account is large, then good for him. I think a capital gains tax should be levied on those hedge funds, personnally, unless they are in a retirement account like mine are. However, maybe no one's retirement account capital gains should be tax deferred. We shouldn't write so many specific tax laws, the more that are written, the more loopholes are created.

It would be interesting to see the "total tax" equation if sales tax was added in. The author, mentions that when payroll taxes are added to the income taxes, that the percentage of total tax the rich pays drops. Well, of course it does, because, as the author points out, there is a cap on social security taxes. He states that someone making $106,800 pays the same as Warren Buffet. Well, hey, guess what...they will both get the same Social Security payment also. Social security taxes are for social security, not for general treasury use.

I also loved the comment about how Reagan collected a $2 trillion dollar surplus in Social Security tax. I thought this was funny in light of all of the crying these days over Social Security insolvency.

The author then goes on to talk about how great Germany is. They tax the hell out of you, and then provide services back to you. What if I don't want to use those services? There are a lot better ways to fix the American tax policy like:

Set tax brackets on capital gains similar and in line with the income tax brackets.

Lower income taxes across the board and add in a federal sales tax rate.

Get rid of deferred tax on retirement accounts.

Remove all the itemized deductions and non-taxable items.

Simplifying the tax code would save a lot of money IRS operating costs.

Get rid of corporate loopholes that allow companies to hide money overseas, or not count it as profits, etc.

[Thiebear]

I don't mind a tax code that taxes in the "Budget" each year that reflects the upcoming year in increments up or down by 3-5%.

Kind of like rent, can't up it 30% do it incrementally.

Taxes is not the cure as our most profitable times were during these 'low times'.

Watchng what you do would be nice.

[LadySkinsFan]

GHWBush called supply side economics or the trickle down theory "voodoo economics" until he was tapped to be Reagan's VP. Then it was the greatest economic system in the world. I'd have a trickle up theory, where jobs are created a la the WPA and the CCC in the 30s, where people are put to work, money flows through the economy from workers and then upward. It means that the bottom line (read: obscene profits) isn't as important as putting people to work, generating income at the local level which then moves upward through the economic chain. It's humane and is the right thing to do. Generating obscene profit is the wrong thing to do, at the expense of human beings.

[DRSmith]

GHWBush called supply side economics or the trickle down theory "voodoo economics" until he was tapped to be Reagan's VP. Then it was the greatest economic system in the world. I'd have a trickle up theory, where jobs are created a la the WPA and the CCC in the 30s, where people are put to work, money flows through the economy from workers and then upward. It means that the bottom line (read: obscene profits) isn't as important as putting people to work, generating income at the local level which then moves upward through the economic chain. It's humane and is the right thing to do. Generating obscene profit is the wrong thing to do, at the expense of human beings.

And that formula never stopped people from getting rich but more imporantly it meant a much better place to live

[Larry]

Actually, I'd observe that I suspect that the biggest logical leap that the article makes is that it assumes that everything that's changed, economically, since 1980, changed because of Reaganomics.

He might be right. But he might not, too.

And I agree with a tiny part of what HoustonSkin said: I can't come up with any reason at all why Capital Gains income is treated any differently from any other income. To me, that's one of the biggest "loopholes" in the entire tax code.